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Saturday, December 13, 2008

Honeybee Muses: "Lock and Key" and "Cryptic"

(New pictures from Kirk today.)

TRUSTWORTHINESS: One has to wonder what happened to it.

We have Illinois Governor, Rod Blagojevich, arrested for allegedly trying to sell Obama's Senate seat.

And we have Bernard Madoff, a Wall Street legend and former chairman of the Nasdaq, arrested for allegedly committing a $50billion swindle -- said to be perhaps the largest in Wall Street's history.

On Moneytalk today, there was a woman caller who said she lost $millions investing with Madoff. She only had $20,000 left. She said that she had enjoyed the ride and never suspected it was a "Ponzi Scheme."

So how can investors protect themselves from losing money at the hands of financial gurus or investment companies that may be less than truthful, or who only talk about the "good stuff" while burying the "bad stuff?" Time in the business offers no safety, Madoff has been on Wall Street for 50 years.

Does GFAM report on Bob Brinker's record truthfully and completely? I don't see anything about the QQQQ trade (which he also recommended for the BJ Group that was taken over by GFAM) in their promotions of him. And I don't see anything about his long-standing mid-1400's buy level. Maybe I missed them. I'm sure they wouldn't select just some of the "good stuff" and leave out the "bad stuff" -- that would be deceptive.

But back to Madoff.... I think the thing that comes through loud and clear from reading what is being said by some of the victims of Madoff's fraud, is that they "trusted him" because he seemed to be a "straight-shooter." However, we now know that Madoff did not offer transparency, and he didn't show his losses. This from Yahoo News: "Madoff had long kept the financial statements for his hedge fund business under "lock and key," according to prosecutors, and was "cryptic" about the firm. The hedge fund business was located on a separate floor from the market-making business."

As Kirk pointed out in his article: "Beware of anyone who doesn't show losses." This Marketimer Bulletin was issued in October 2000:

MARKETIMER is projecting a significant countertrend rally which is expected to be led by the Nasdaq 100 Index. We expect this rally to persist over a period of approximately 2-4 months, and to generate Nasdaq gains in excess of 20% from the vicinity of the recently established Nasdaq closing low point.
We view this projected Nasdaq rally as a significant trading opportunity for MARKETIMER subscribers seeking potential short-term capital gains. Our clear vehicle of choice for this opportunity is the Nasdaq 100, which is traded on the American Stock Exchange under the ticker symbol QQQ.
We recommend MARKETIMER subscribers with aggressive objectives invest 30% to 50% of existing CASH RESERVES in the QQQ shares in order to exploit this opportunity. Also, we recommend subscribers with conservative investment objectives invest 20% to 30% of CASH RESERVES in the QQQ shares in order to take advantage of this opportunity.
MARKETIMER will provide follow up guidance for this short-term opportunity in regular monthly editions, and, if necessary, in follow up bulletins.
We recommend subscribers interested in taking advantage of this recommendation act immediately.
The final time that Marketimer ever mentioned "those holding Nasdaq 100 (QQQ) shares," was March 7, 2003 (four days before Brinker's "buy" signal) -- after the Nasdaq had lost over 70% . The trades were never closed, but Brinker issued a NEW buy signal on the Nasdaq Index (RYOCX) and added it to ALL of his model portfolios at the same time he issued his March 11, 2003 all-in buy signal.

Altogether, Brinker offered monthly advice for those holding shares bought on his "Act Immediately" advice for 23 months. Here are his final words about the trade: March 7, 2003 Marketimer, Bob Brinker said: "For subscribers holding Nasdaq 100 (QQQ) shares, we recommend holding for a significant recovery in the shares in the next cyclical bull market."

Mark Hulbert uses an asterisk and footnote to explain why he gives Brinker a mulligan on the QQQQ trade in his model portfolios rankings. Mark Hulbert claims that Brinker said at the time of making the trade that it would be "off the record." That is simply false. Even Hulbert had originally added the Q's to the portfolios and then removed them when Brinker announced that he would not make the trade part of his official record.

In other words, even though Brinker recommended his subscribers USE MODEL PORTFOLIO CASH RESERVES, he was not willing to take responsibility for the trade by reflecting it in model portfolio performance records.

Now let's look at 2008:

January 4, 2008 (S&P 1468.36) Bob Brinker said:
“In summary, the Marketimer stock market timing model indicates that conditions are favorable for the market as we enter 2008. We expect the S&P 500 Index to achieve new record highs this year and to reach the 1600’s range…….attractive for purchase on any weakness in the S&P 500 Index mid-1400’s range.”

* January 20th -- rescinded mid-1400's which began in August 2007 (recommended dollar-cost-average only).
* Feb 10, 2008 all-in @ low-1300's.
* June/July as market hit bear territory: Claimed the price of oil was "inversely correlated" to the stock market.
* Aug 5, 2008 all-in @ 1240 or less.
* Sept 2, 2008 all-in @ low-to-mid 1200's
* September 16th -- rescinded low-to-mid 1200's
; still recommends dollar-cost-average into market.
* September 30th -- (on Moneytalks said) "Do NOT sell stock"
* October 3rd -- still recommended dollar cost-average only.
* October 4th -- (on Moneytalk said) New highs impossible in 2008

* November 4th -- In Marketimer, Brinker admitted he was wrong in his "view that the stock market would achieve a level of equilibrium at higher levels." He blames it on the "panic atmosphere" in the credit markets and the stock market. In other words, this is the famous "exogenous event" that has always been waiting in the wings all these years.

More snow for the crowd who fears global warming. 8) This is the Sierra at Tahoe

Kirk sent these new pictures of warm Baja. He said there isn't enough wind to windsurf the past few days, but enough for the big kites to get out...and a pelican. 8-)

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